Getting Sick Can Be Really Expensive, Even for the Insured

When you get really sick, the medical bills may not be your biggest financial shock.

New research shows that for a substantial fraction of Americans, a trip to the hospital can mean a permanent reduction in income. Some people bounce right back, but many never work as much again. On average, people in their 50s who are admitted to the hospital will experience a 20 percent drop in income that persists for years. Over all, income losses dwarfed the direct costs of medical care.

The pattern and impact are comparable to what happens to workers at a mill when it closes.

The authors of the paper, published in The American Economic Review, were surprised by how often an illness or injury could upend the finances of Americans with health insurance.

“I had sort of assumed that if they had health insurance, then they had economic protections against health shocks,” said Amy Finkelstein, an economist at M.I.T. and an author of the paper. “I hadn’t thought about the idea that even with the best gold-plated, fancy health insurance, you could still have a lot of economic risk.”

The researchers focused on hospitalization because it’s one of the easiest ways to pinpoint when a person’s health declines substantially. They looked at people who had heart attacks, strokes or knee replacements, as well as those who contracted pneumonia or were hit by cars. The only cause of hospitalization they excluded was childbirth.

Hospitalization can cost thousands (or tens of thousands) of dollars, which is why health insurance has been shown in study after study — including a seminal one of Oregon patients in which Ms. Finkelstein was a co-author — to greatly improve the financial security of people who experience illness or injury.

Obamacare brought new insurance coverage to some 20 million Americans, and that coverage has seemed to make them more financially secure. Low-income people in states that expanded Medicaid appear to have fewer medical debts and bills in collections. Fewer of them are avoiding medical care because of the cost.

But the costs of illness are not always limited to medical bills. Being sick can make it hard to work. Though people who had insurance were better protected from hospital bills than people who were uninsured, both groups faced a substantial risk that they would lose income, and a substantially increased chance that they would declare bankruptcy after leaving the hospital.

On average, uninsured people in the study owed the hospital $6,000, compared with only $300 for those with insurance. But the average decline in income for both groups was much larger — an average earnings hit of $11,000 by the third year. Much of that average — around 60 percent — came from people who never returned to work at all.

– New York Times

Read the full article here.